Slide Set Six: Personal Property II Liens and Security Interests

Last Time – We Spoke About: Part One: Gifts Fundamental Principles. Gift Intervivos Unconditional Gifts Gifts in Consideration of Marriage Gift Causa Mortis

Tonight – We Will Speak About: Part One: A Continuation of Exercising Rights in Personal Property – Including: - Liens and Security Interests for Personal Property So here we go.

Liens

Part One: Liens So just what is a Lien? Well lets go to Blacks Law Dictionary, and remember we need to think of property as a collection of “Rights” and not a collection of “Things”; Blacks defines a “LIEN” as: A charge or security or encumbrance upon property A claim or charge on property for payment of some debt, obligation or duty A right to retain property for payment of debt or demand A simple definition of Lien is: “The Right to encumber certain property for security on a debt”

Liens A lien is a security device to enforce payment Types of Liens A. Common Law Lien A Common Law Lien is a common law, customary right to possess or retain personal property which has been improved or enhanced in value by the person who claims the lien until the person claiming the property pays in full all charges attaching to the property for such improvement. Every lien requires that: 1. A debt has arisen from services performed on the thing; 2. Title to the thing is in the debtor; and 3. Possession of the thing is in the creditor. B. Statutory Lien A Statutory Lien is an express right to enforce a lien pursuant to statute.

Liens Classes of Liens Consequence of Classification A. General Lien A general lien is the right to retain ALL OF THE PROPERTY of another person as security for a general balance due from such other person. Certain creditors and universal agents can have a general lien. B. Special Lien A special lien is the right to retain SPECIFIC PROPERTY of another to secure some particular claim or charge which has attached to the property retained. A common or private carrier, a warehouser or ordinary bailee, a trustee, attorney, arbitrator, and a general or special agent may have a special lien. Consequence of Classification The question as to whether a lien is general or special becomes important only when the lienholder releases a portion of the chattels held as security. Where a doubt exists as to whether the lienholder has a general or special lien, the law presumes the lien to be special rather than general. General Lien If the lienholder has a general lien and releases part of the chattels, he releases no portion of the lien and he may hold the unreleased portion until the entire lien charge is paid. Special Lien If the lien is a special lien and the lienholder releases a portion of the chattels held, he thereby waives the lien to the extent of the chattels released.

Liens Particular Issues Regarding Liens 1. Lien Given By One Not The Owner A lien is a proprietary interest, a qualified ownership, and, in general, can only be created by the owner or someone authorized by the owner. Example: A person in possession of a truck with the owner’s permission cannot create a lien for repairs. The fact that the repairs are for the benefit of the owner is immaterial.

Liens Particular Issues Regarding Liens 2. Innkeepers and Common Carriers The lien of an innkeeper and a common carrier is recognized at common law on the theory that common carriers and innkeepers, being compelled by law to indiscriminately accept all persons who present themselves, must be protected and secured in their just charges for the services rendered. a. Innkeepers: This lien is peculiar in nature. It attaches to any property brought into the inn by the guest. It is not essential that the guest should, in all cases, be the owner of such property. The property may be that of a third person, or even stolen goods. If the innkeeper has no knowledge that such property is not rightfully in the possession of the guest, such lien will attach generally to all such property to the extent of a reasonable charge for the services rendered. b. Common Carriers: Although a common carrier is generally required, like an innkeeper, to accept all goods delivered, it has no lien on the goods which it receives from persons other than the owner. The reason for this rule is that the carrier may demand transportation charges in advance, or in the alternative, proof from the shipper that he is acting with the authority of the owner (i.e. as his agent).

Liens Particular Issues Regarding Liens (Continued) 3. Warehouser At common law a warehouser was not recognized to have a lien on bailed chattel. Such a lien is NOW RECOGNIZED pursuant to statute under the New York Uniform Commercial Code (Section 7-209). It should be noted, however, that despite this statutory lien, the courts have held that a garagekeeper (a subclass of warehouser as opposed to a mechanic) does not have a right under our state’s constitution to conduct a satisfaction of this lien through an ex parte sale. 4. Statutory Liens New York’s Lein Law expressly recognizes a number of liens to enforce payment for goods or services performed. These include liens for: 1. Mechanics, 2. Hospitals, 3. Artisians, 4. Animal caretakers – including vets, 5. Stone carvers, 6. Shipkeepers, and 7. Virtually all creditors.

Liens Waiver of Liens 1. Contract A lien can be waived either by provision or fulfillment of a contract (such as payment). 2. Substitution of Other Security Where a lienor accepts security for payment, the security eliminates the lien. 3. Demand for Unlawful Charges Where the lienor includes within his valid lien, amounts in excess of his lawful charges, he is deemed to state that a tender of the lawful amount will not be accepted, and as such the lien is deemed waived, with the lienor’s remedies being those under the law for default. 4. Reservation or Temporary Use The lien is NOT deemed waived if the lienholder temporarily surrenders the goods to the bailor, if such lienor reserves their lien or permits bailor to have temporary use. 5. Satisfaction A lien can be satisfied upon the sale of the item by the lienor or payment by the lienee.

For next time – Read Assignments on the Webpage. Final Thoughts For next time – Read Assignments on the Webpage. We are a hot bench. Questions???